CH5: Budgets and Reserves

Question 1

What is an assessment p.101

Answer 1

The owners financial obligation to the CA during a given period of time (usually 1 year)

Question 2

What is baseline funding p. 104

Answer 2

establishing a reserve funding goal of keeping the reserve cash balance above zero. Goal: Never purposefully running out of money or having special assessments. Note: reserve contributions and reserve balances are usually lower.

Question 3

What is a budget? p.98

Answer 3

a financial plan for an organization that provides and estimate of CA’s revenue and expenses for a given period of time.

Question 4

What are chart of accounts p.106

Answer 4

an organized list of titles, descriptions, and assigned numbers of all accounts in an organization’s general ledger.

Question 5

What is discretionary budget line items? p.106

Answer 5

These are items based on owner, board, and committee desires - in consideration of values, lifestyle, level of service, etc.

Question 6

What are expenses p.102

Answer 6

operating expenses are those items that occur on a regular basis.

Question 7

What is FHA? p.99

Answer 7

Federal Housing Authority

Question 8

What is FHLMC? p.99

Answer 8

Federal Home Loan Mortgage Corporation

Question 9

What is FNMA? p.99

Answer 9

Federal National Mortgage Association

Question 10

What is full funding? p.105

Answer 10

setting a reserve funding goal of attaining and maintaining reserves at or near 100% funded.

Question 11

What is historical trend budgeting? p.107

Answer 11

assumption that existing line items are needed. Amount of funds allotted to each during current year is adjusted for expected changes in coming year.

Question 12

What is mandatory budget line items? p.106

Answer 12

items based on community and owner needs. Requirements that the community is obligated to meet. i.e. taxes, repairs, utilize, and maintenance.

Question 13

What are major improvement expenses? p.102

Answer 13

items that are not necessarily required but added ti improve and enhance the overall welfare, safety, and life of residents/community.

Question 14

What is an operating budget? p.107

Answer 14

section of the budget devoted to operating activities includes operating expenses and major improvements but not the replacement fund.

Question 15

What is operating expenses? p.102

Answer 15

items that occur on a regular basis

Question 16

What is percent funded? p.104

Answer 16

measure relative size of the reserves by looking at how the fund measures up against the needs of association.

Question 17

What is reconciliation of expenses and revenue? p.111

Answer 17

reconciling estimated expenses with your CA’s anticipated revenue.

Question 18

What is a replacement fund? p.103

Answer 18

funds put aside in reserve for the replacement of major components of a community’s common property.

Question 19

What is reserve cash flow statement? p.111

Answer 19

shows the amount to be funded and the amount to be expanded from the replacement fund over a given period of time.

Question 20

What is reserve formula? p.111

Answer 20

A years budget line item is the result of current replacement cost - funds on hand, divided by remaining useful years of life.

Question 21

What is a reserve specialist? p.110

Answer 21

designation program to help community managers and board members identify qualified reserve study providers.

Question 22

What is a reserve study? p.108

Answer 22

a budget planning tool that considers the current status of the replacement fund and determines a stable and equitable funding plan to offset the anticipated future major common areas expenditures.

Question 23

What is revenue? p.101

Answer 23

consists of the collective items or amounts of income which, in the case of a community association, are appropriated for public expenses.

Question 24

What is a special assessment? p.101

Answer 24

a one-time assessment often voted on by owners to recover a major expense that was not included in the annual budget or replacement reserve.

Question 25

What is threshold funding? p.105

Answer 25

keeping the reserve balance above a specified dollar or percent funded amount.

Question 26

What is VA? p.99

Answer 26

Veterans administration

Question 27

What is zero-base budgeting? p.107

Answer 27

all line items are set to zero and the amount of funds allotted to each must be justified.